Mid-Day Update
Bulls Making No Attempt
Dear Bottarelli Research Member,
The market has been solidly in the red all day long — and the bulls are not making any sort of attempt to combat the selling pressure. Now, it’s important to note that the Blue Chips did find intra-day support at their 50-day moving average, but if this level breaks, then look out below. If you recall, the Dow got clobbered on Friday, October 19th, and we could witness a similar end-of-week sell off tomorrow if this level is ruptured.
In fact, a very similar chart pattern is showing up on the S&P 500 as well. You could now make an argument for a head and shoulders formation on both indices, which could trigger a re-test of the Dow’s 200-day moving average 600 points below current levels.
As a result, I’d like to cautiously remain over-exposed to the put side of the ledger — and that means maintaining our position in the FXI November 200 Puts (FNQ WR).In a market that could potentially drop very quickly, let’s take every precaution we can. If the selling pressure builds steam, these puts will increase in value very quickly. As you can see below, the FXI has a lot of room to fall, so hold thee puts for more gains.
I’ll also scan for additional put opportunities — and the instant something comes up you’ll be the first to know. But at the same time, it’s also important to make note of the companies exhibiting strength today. Companies like Cummins (CMI – NYSE), DryShips (DRYS – NASDAQ), Mastercard (MA – NYSE), and Excel Maritime Carriers (EXM – NYSE) have all bucked the bearish trend and are trading higher today, so I’m closely follow these names for any powerful snap-back call trades. A quick look at CMI shows a massive downside “gift gap” that could get filled by the end of the year, so this will certainly be a stock I watch closely.
Until then, let’s remain positioned to the downside and see how the close of today’s trading reacts to the critical 50-day moving average. This will dictate how we trade going into next week. And as always…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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